v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
7.
Income Taxes

The following table presents Devon’s total income tax expense and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Earnings before income taxes

 

$

2,384

 

 

$

1,161

 

 

$

2,550

 

 

$

1,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current income tax expense

 

$

378

 

 

$

226

 

 

$

190

 

 

$

322

 

Deferred income tax expense

 

 

95

 

 

 

18

 

 

 

329

 

 

 

59

 

Total income tax expense

 

$

473

 

 

$

244

 

 

$

519

 

 

$

381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. statutory income tax rate

 

 

21

%

 

 

21

%

 

 

21

%

 

 

21

%

State income taxes

 

 

(1

%)

 

 

1

%

 

 

(1

%)

 

 

1

%

Other

 

 

—

 

 

 

(1

%)

 

 

—

 

 

 

(1

%)

Effective income tax rate

 

 

20

%

 

 

21

%

 

 

20

%

 

 

21

%

In the second quarter of 2026, state income taxes included a $56 million deferred tax benefit from the release of valuation allowances against legacy Devon state deferred tax assets in connection with the Merger. The release reflected a change in judgment regarding the realizability of legacy Devon state deferred tax assets, driven by increased forecasted future state taxable income of the combined company.

On February 18, 2026, the IRS issued additional interim CAMT guidance through Notice 2026-7 (the “Notice”). In addition to other provisions, the Notice includes a new Adjusted Financial Statement Income (“AFSI”) adjustment beginning in 2025 for amortization of domestic research costs, including accelerated amortization under the OBBB transition rule. Accordingly, Devon’s six months ended June 30, 2026 income tax expense included a current tax benefit of approximately $218 million and a corresponding deferred tax expense associated with the deferral of income taxes resulting from the Notice.